Question

an invester buys 100000, 10% corporate bond maturing in 2030 for 125000. the bond is callable starting in the year 2020. what is the most appropriate measure for calculating yield?

Answer 1

C. Yield to Call

Step-by-step explanation:

As the investor pays $125,000 for 10% having a face value of $100,000 so it seems that there is a premium of 25% in the bond. Now in the case when the bond is called before to the maturity that occurs when the market rate is less than the coupon rate. Also the same is shown in the question

So for determining the yield, the best way measure and appropriate is yield to call